As the summer months come to a close, you can already feel it in the air that Fall is upon us. I always associate this time of year with a sense of renewal or change, probably because of the school calendar and end of summer holidays that goes along with it. Like everything else since last March, this Fall will also usher in significant changes as society tries to get children back to school and the economy another step closer to normalcy. Our household is very attached to the reopening of schools as my wife, Josie, is a teacher and we have one child in each level of education - elementary, secondary and now University as well. Our oldest son, Lucan, is beginning his University experience from home with all of his courses delivered on-line. Not exactly the life-changing experience he was envisioning, but this pandemic has changed so much. We didn't do too much travelling this summer. As mentioned in my last newsletter, we took a week in July and camped in the Kincardine area - a favourite destination of ours for many years. Not convinced that we are die-hard campers, but the change of scenery was appreciated and we made some good memories together.
Both stock markets and fixed income markets continue to perform very well overall considering the pervasive hits to the economy and unemployment levels that this pandemic has left in its wake. The success of the market averages are a bit skewed by the tremendous outperformance of a handful of tech companies. Some sectors in Canada like resources and REITs are still struggling, though they have recovered significantly from the lows of March. I have included a good piece on preferred shares this month. Despite consistent good dividends, rate-reset and floating-rate preferred share prices have been on a dismal journey the past few years as interest rates have steadily fallen. However, we are seeing signs of encouragement as this asset class offers significant yields and potential for capital gains that stand in stark contrast to the lack of return potential from other fixed income alternatives, especially if interest rates ever start to climb back upward in response to the unprecedented government intervention this year.
Please contact us if there are any concerns you may have. Though meetings in our office are challenging right now, we can talk by phone or Webex. To use Webex, all you need is access to a computer or smartphone that provides video and/or audio capabilities. We can then send you a simple link to get connected. Contact Michelle if you would like to schedule a "meeting". We hope everyone found a way to enjoy this summer of 2020 and wish everyone a great start to September and the Fall season.
Planning for Possible Increase to the Capital Gains Inclusion Rate
The capital gains inclusion rate determines how much tax you will pay when you sell something at a profit in a non-registered account. If, for example, you sell a position and realize a $10,000 capital gain or profit, under the current 50% capital gains inclusion rate, you would only pay tax on half of the $10,000 profit. The level of this inclusion rate has varied over the years to as high as 75% in the 1990s, and with all of the significant government spending that has happened this year, an increase to the rate would not be surprising. A return to 75% would translate to a 50% increase in your capital gains taxes from the current 50% level. This report will provide some strategies to consider: Planning for Possible Increase to the Capital Gains Inclusion Rate
Your Power of Attorney (POA) - An Important Document to Understand and Have in Place
As the largest bulk of our population grows steadily older, the importance of Will & Estate planning grows with it. This new article from our RBC financial planning team provides a comprehensive review of the topic of Powers of Attorney. The financial industry provides numerous examples each year of the unpleasant consequences of poor Power of Attorney and Will planning. This is a good article to help you better understand the key features of this important estate planning document. Link to article: Power of Attorney (Common-law provinces)
Audio commentary: A reversal of fortunes for the Canadian preferred share market
Preferred shares have provided very good, tax-advantaged income to investors for many years. However, the market performance of preferred shares as an asset class, particularly the rate-reset and floating-rate variety, have not fared as well. There have been some good developments in the last few months that have us feeling more optimistic about this asset class.
Mikhial Pasic, Fixed Income Portfolio Advisor with RBC Dominion Securities, joins Chris Girdler, Fixed Income Portfolio Advisor with RBC Dominion Securities, to discuss the recent reversal of fortunes for the Canadian preferred share market, after what has been a bumpy ride in recent years. Mikhial highlights how a recent ruling from the bank regulator helped spur the recent strength and outlines reasons why there might be additional room for positive preferred share performance.
Listen here (21-minute duration):
www.rbcplayer.com/reversal_of_fortunes_for_canadian_preferred_share_market
Update on Covid-19 and the Race to Develop a Vaccine
At the risk of bombarding everyone with additional commentary on the global pandemic, we did find this discussion from RBC Capital Markets a worthwhile discussion to listen to if you have time.
Dr. Kennen MacKay, Managing Director and Co-Head of Biotechnology Research for RBC Capital Markets, joins Janet Engels, Head of the Portfolio Advisory Group – U.S., to talk about where things stand with COVID-19. They zero in on the data on the number of cases, and discuss how close we are to a vaccine as well as the impact of the race to find effective treatments, now and in the future. Janet asks the question on all our minds: “When will we be back to normal?”
Listen here (20-minute duration): www.rbcplayer.com/COVID_19_update_race_to_develop_a_vaccine